American Small Business League v. Maria Contreras-Sweet
ORDER by Judge Chhabria granting 13 Motion to Dismiss. (vclc1S, COURT STAFF) (Filed on 10/18/2016)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
AMERICAN SMALL BUSINESS
Case No. 16-cv-02410-VC
ORDER GRANTING MOTION TO
Re: Dkt. No. 13
The motion to dismiss the complaint is granted.
The Small Business Act requires the President to establish a "Government-wide goal for
participation by small business concerns" at "not less than 23 percent of the total value of all
prime contracts for each fiscal year." 15 U.S.C. § 644(g)(1)(A)(i). That statute also requires
individual agencies to establish their own goals for small business participation in government
contracting. Id. § 644(g)(2)(A). And the statute requires the Small Business Administration to
submit a report to the President and Congress each year, explaining whether these goals have
been met and discussing the reasons for any failure to do so. Id. § 644(h)(2)(B)-(D). If an
individual agency has failed to meet its small business contracting goal, the report by the Small
Business Administration must include a description of that agency's plan for addressing the
failure, as well as commentary by the Small Business Administration about the agency's plan.
Id. § 644(h)(2)(D). The parties refer to this report mandated by the statute as the "goaling
The American Small Business League alleges that the Small Business Administration's
2015 goaling report fails to comply with the statute for two reasons. First, the League alleges
that the report improperly excluded some types of contracts when calculating the total value of
prime contracts, where the statute requires "all prime contracts" to be considered when
determining whether the 23 percent goal has been met. Id. § 644(g)(1)(A)(i) (emphasis added).
Second, the League alleges that the report improperly classified certain Fortune 500 companies
as "small businesses" for purposes of calculating the small business participation rate. The
League seeks a court ruling requiring the Small Business Administration to amend its 2015
report, and to refrain from committing these alleged violations in the future.
However, the Administrative Procedure Act does not allow federal courts to review
everything an agency does. It only permits judicial review of "final agency action." 5 U.S.C.
§ 704; see Lujan v. Nat'l Wildlife Federation, 497 U.S. 871, 882 (1990). An agency action is not
considered "final," and is therefore not reviewable by a court, unless it is "one by which 'rights or
obligations have been determined,' or from which 'legal consequences will flow.'" Bennett v.
Spear, 520 U.S. 154, 178 (1997). The goaling report doesn't meet this test. It neither alters the
legal regime to which individual agencies or small businesses are subject, nor results in direct
and appreciable legal consequences. The report does not carry penalties for an agency's failure
to meet the small business participation goal. It does not bind agencies to comply with any
proposed remediation plan. Any appreciable consequence of the report – such as an agency's
decision to start awarding more contracts to small businesses – would be indirect, because the
agencies make the ultimate decision whether and how to award contracts. See Franklin v.
Massachusetts, 505 U.S. 788, 796-99 (1992) (concluding that a census report authored by the
Secretary of Commerce and submitted to the President is not a final agency action because "the
Secretary's report to the President has no direct effect on reapportionment until the President
takes affirmative steps to calculate and transmit the apportionment to Congress"); Renee v.
Duncan, 686 F.3d 1002, 1016-17 (9th Cir. 2012) (concluding that the Secretary of Education's
annual report to Congress, in which interns were allegedly improperly classified as "highly
qualified" teachers, was not final agency action); see also Guerrero v. Clinton, 157 F.3d 1190,
1195 (9th Cir. 1998) ("Although a more detailed report or a report that highlights impact more
emphatically might have a better chance of getting some member of Congress's attention, it
carries no greater cloud than that.").
The upshot is that Congress enacted a statute requiring the Small Business
Administration to provide information about the participation of small businesses in federal
contracting. If the Small Business Administration is giving Congress bad information, then
Congress can do something about it, either in an oversight or legislative capacity. "Having
requested the report, Congress, not the judiciary, is in the best position to decide whether it's
gotten what it wants." Guerrero, 157 F.3d at 1195.
The complaint is dismissed for lack of subject matter jurisdiction.1 Because leave to
amend would be futile, dismissal is with prejudice.
IT IS SO ORDERED.
Dated: October 18, 2016
United States District Judge
Current Ninth Circuit precedent holds that the lack of final agency action is a defect in subject
matter jurisdiction. Fairbanks N. Star Borough v. U.S. Army Corps of Eng'rs, 543 F.3d 586, 589
(9th Cir. 2008). Although at least one Ninth Circuit judge has questioned this, the outcome of
this motion would be the same under Rule 12(b)(6). Pebble Ltd. P'ship v. EPA, 604 F. App'x
623, 625-26 (9th Cir. 2015) (Watford, J., concurring) (questioning whether dismissal should be
for lack of subject matter jurisdiction and suggesting that the court reexamine the issue).
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